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Silver Market Update

September 18, 2014 - 9:21am

As you probably know we had expected gold and silver to start picking up in the last update, for various reasons, the most important of which being that they are at important support at the most bullish time of year, seasonally, for the Precious Metals, but the dollar rally accelerated even more, driving gold and silver still lower and deeper into key support which is now being severely tested. If the dollar continues higher then gold and silver could crash this key support, but this doesn’t look likely short-term because the dollar is now critically overbought and needs to take a breather.

On its 15-year chart we can see that silver is now at a crossroads – although it has been in a bearmarket for 3-years it has not yet broken down from the long-term uptrend shown on this chart, but if the dollar rally should continue with another strong upleg, that is what we should expect. Should the major uptrend fail there will be no disputing that silver is in a bearmarket. Failure of the uptrend and a breach of the strong support at last year’s lows would lead to another steep downleg.


In the light of recent developments in the dollar, there is no disputing that the 4-year chart for silver looks grim, although there is room for a short-term bounce off the strong support. As we can see a major downtrend is in force and with the pattern that has formed over the past year approximating to a bearish Descending Triangle, silver is coming under increasing pressure to crash the support at last year’s lows, especially as this support has been eroded by repeated attacks on it. However, with the dollar very overbought and in need of a rest, and silver short-term oversold, there is a room for a bounce off the support first. While a big up day on high volume would improve the picture, it would take a break out of the downtrend shown on this chart to start to turn the picture more positive.

The 15-month chart reveals why the support at last year’s lows is so important, as it has supported the price and produced reversals on 3 occasions over the past year, and could do again now, although because of the positive dollar outlook, any recovery could be short-lived. The other reason for presenting this 15-month chart is to enable comparison with the COT chart shown immediately below it.


On the 6-month chart we can see how the persistent downtrend of the past 2 months has resulted in the price arriving at the support level in an oversold condition. In the last update we got fooled by the bearish “Shooting Star” candlestick shown, thinking it was instead a bullish “Inverted Hammer”. This was a permissible error as a shooting star normally comes after a significant advance, and there was virtually no advance preceding this one.

So, we should not be surprised to see a sudden bounce back here from support, if the dollar should consolidate and especially react back, but should the dollar suddenly erupt into a new impulse wave, as it is expected to, then silver is likely to turn back down again and crash the support, which lead to a steep downleg. Please refer to the parallel Gold Market update for the latest dollar charts and analysis.

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About Clive Maund

The years following 2005 saw the boom phase of the Gold and Silver bullmarket, until they peaked in 2011. While there is ongoing debate about whether that was the final high, it is not believed to be because of the continuing global debasement of fiat. Th

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